Is the Craft Beer Bubble Ready to Burst?

Craft brewers and industry insiders have been talking about the bubble for years, the rapid growth of craft fostering fairly reasonable doubts as to its long term sustainability. I have been a part of the conversation myself since I first entered the craft beer world professionally some six years ago and have overheard rumblings of it since day one. Is it a real thing for us, our impending doom just over the horizon like it was for the dot com boomers of the 90s? What can we do to bulletproof our businesses for the future? Is that even possible with the beer market in constant flux? Are we approaching maximum market saturation? All of those questions and more may be answered soon as after years of double-digit growth in the craft sector, we are now seeing that growth slow to single digits for the first time since the early days of the beverage revolution.

In 2015, we surpassed the peak number of breweries in the U.S. prior to Prohibition with 4,144, and now we are at a record high 5,300-plus breweries and are still adding more daily. The fight for shelf space and taps has never been harder nor the market more competitive as breweries rush to grind out whimsical and innovative beers as fast as possible to appease craft beer drinkers that seemingly crave only the newer and shinier models while last year’s IT beer – sometimes even last month’s – gathers dust on the shelf.

Even the most sought after whales aren’t immune to our fickle and unpredictable natures, apparently, as craft drinkers are just as likely to decry much mythologized beers like Hopslam, KBS and Hunahpu as they are the efforts of the brand new brewpub down the block. How many times have you heard that this year’s batch pales in comparison to 2012/13/14? Have we become that spoiled and jaded as we float around in a veritable sea of brands like Scrooge McDuck in a swimming pool full of gold coins? Have we so soon forgotten the craft wasteland that was the southeastern US just a few years ago when macro reigned supreme and the best choice you could get at your corner bar was Killian’s or Michelob Amber Bock? Is the brand loyalty of our fathers and grandfathers just a quaint memory?

Even the bigger breweries are feeling the winds of change as long-cherished brands languish on shelves forgotten. Huge (by craft standards) breweries like Stone have altered their business models drastically, de-emphasizing core beers and putting out new collaborations and one-offs almost daily it seems. Despite being the tenth largest craft brewer in the US, Stone laid off more than 75 employees last October, many of whom had been with the company for over a decade. Lager-driven brewing giant Boston Brewing Company, home to the Sam Adams brand, has diversified into ciders and hard sodas and added IPAs, Double IPAs, and a new juicy IPA to their lineup in recent years in an attempt to stay relevant as their sales dip for the first time in decades. Boston Brewing head exec Jim Koch even penned an op-ed for the NY Times in April citing lax government regulations in dealing with anti-trust violations by Big Beer as the cause of craft’s decline. As far back as two years ago, Boston Magazine wrote an article on how craft drinkers had abandoned Koch’s pioneering gateway beers, with even hometown craft bars refusing to put his beers on tap.

West Coast IPA specialists Green Flash recently had their first layoff ever. Even craft royalty Dogfish Head, long known for their experimentation, have reduced the number of offerings they package to concentrate on their better sellers. Portland’s BridgePort Brewing – once fairly ubiquitous in the southeast before changes in our Prohibition-era laws jumpstarted the brewing industry here and allowed better beer from other places – just laid off half its brewing staff in April, citing falling salessimilar to that seen by many legacy breweries. As a retail store manager, I see it daily as fantastic breweries like Lagunitas, Avery, Anchor, Great Divide and Oskar Blues that were once the darlings of the craft set are overlooked in favor of newer, smaller breweries.

Sam Calagione of Dogfish Head

Have the bigger craft breweries fallen victim to their own success as our smaller-is-better mindset –borne of our decades old dislike of the Big Three and their macro swill as I so often hear it called –drives us to seek out lesser known breweries and brands? Is it blowback against the acquisition of so many brands by A-B Inbev, Constellation, and other multinationals, beer drinkers perceiving more successful breweries as more corporate and smaller breweries as plucky underdogs? Or is it merely the extension of the adventurous spirit that brought most of us to craft that causes us to seek out the new and different and forget about the breweries that paved the way for the revolution?

Most of us in the craft beer world like to think we are above marketing gimmicks, flashy packaging, and other trivial things, our susceptibility to such far outweighed by the objective quality of the beer itself, which is naturally subjective as everyone’s tastes are different. However, the more successful breweries seem to reinvent themselves fairly often, packaging updates lending a much needed boost to flagging sales.

As a former sales manager of two craft breweries myself, I have personally seen a beer I rebranded with a new name, identity and packaging go on to outsell the original more than five to one, many people swearing that the new beer was the best thing the brewery had ever produced… never mind that it was not only the same recipe as the beer that previously sat dying a slow death on the shelf but also the same exact batch. Our lofty ideals aside, we all like a pretty label or a killer name that we can hitch our wagon (or pedal tavern) to and mythologize. I am fairly certain Dark Lord would never have become famous if it were simply called Three Floyds Stout.

So, all of that said, where does that leave us as craft drinkers and the end users in an economic equation that seems increasingly lopsided? We suffer an embarrassment of riches while brewers of all sizes struggle like never before. We craft beer drinkers are a finicky and fickle lot, which is not news to anyone. We champion local, even when it doesn’t taste as good. We support hard working brewers until they reach a level of success we find distasteful, then we abandon them. For some of us, any hint that a brewer sold out is enough for us and we’ll spend our money elsewhere. Drinking our conscience aside, we seek the new and the different and the innovative. It’s a driving force in an industry that has been defined by innovation since Jack McAuliffe repurposed dairy equipment and 55 gallon drums to brew beer at New Albion in 1976. We applaud ingenuity and hard work, and we support it with our pocketbooks until something new catches our fancy. Where does that leave yesterday’s rock star brewers?

An industry known for its pie-in-the-sky idealism and bootstrappy innovation by beard-and-flannel-sporting mavericks with gleefully contrarian natures is facing an increasingly competitive market that is rewarding their long hours and hard work with rapidly diminishing returns as the community once known for its kumbaya camaraderie inches toward a more cutthroat future. Market forces are what they are, and no one is immune. Some breweries like Dogfish Head are seeing blowback for defending their trademarks against smaller breweries, many heralding such infighting as the end of an era. To some, it means craft breweries are having to grow up and face the realities of the corporate world that they have previously been protected from by the easy and natural brotherhood formed by being allied together against Big Beer for so long.

Thus far, I have asked a ton of questions and offered little in the way of answers. I am not sure I have any, other than to state that, in my opinion, we are at a crossroads as a craft culture. It is my belief that the market should be driven by quality if we are to have any integrity whatsoever, but also that we need to not lose our heart and soul and love of local. We all know breweries that mystify us with their longevity as no one claims to like their beer but they hang in like the proverbial rusty fishhook.

Brewers – as always – have to find a balance between expansion and supporting their existing markets with new and exciting beers or at least a packaging update every two years or so. They have to pay attention to what the market wants and give that to the people or they will shrink and disappear. It’s tough, because it’s a volume game. Consumers may complain about the high prices of craft, but they don’t realize how little a brewery makes off every package or keg. You have to reach more people in a bigger area, but you also have to add fermenters and sales staff and brewers and additional shifts to support your growth. Classic Catch 22. The only answer I can think of is to brew the best beer possible, concentrating on consistency, and don’t be afraid to dump beer to preserve your reputation. Listen to the people and give them what they want, balancing your integrity and what you want to brew with what will sell. And remember, you are not just competing with the brewery down the street or across town. Your beers are on the shelf next to Stone, Ballast Point, and Dogfish Head. Local buy-in will only get you so far.

Even if brewers do everything in their power, though, we may be facing a great winnowing as craft beer drinkers can only support so many styles, brands and breweries; and new craft beer drinkers can only be created so quickly. I have heard people deny that we have reached the saturation point by stating that we had many thousands of breweries before prohibition. I would counter argue that the number of breweries prior to Prohibition had dwindled from 4,100-plus in 1873 to less than 3,000 a mere seven years later due to changes in technology, consolidation and other market forces. By 1920, when the 18th Amendment and its enforcement through the Volstead Act became the law of the land, only 669 remained. That’s fewer than the 750 breweries in the state of California last year alone. So, prohibition wasn’t the death knell for breweries, it was just the last straw. Is the era of mergers, acquisitions, and declining sales due to market saturation we are seeing anything like that of the early 20th Century? It’s hard to say. I certainly hope not, but I fear the answer may be upon us before long.

I recently overheard someone being asked if our city of nine breweries, Huntsville, AL, has hit the saturation point, and they pointed to cities like Asheville, NC, with tons more breweries as proof we can safely add more. Asheville was a tourist mecca before craft became along, though, and I doubt a city that size could sustain so many breweries if it were not for the constant influx of visitors. Plus, the state’s beer laws are among the most progressive in the US, which has helped tremendously. Elsewhere in the south, our laws have certainly changed for the better over the last decade, but craft beer remains a niche market while even the most craft-savvy of distributors rely upon Brother Bud to pay the rent and keep the lights on.

As for the consumers, as previously mentioned, we’re living in the Golden Age. Far be it for me to be Buzz Killington and harsh your mellow or crush your blithe spirit as you frolic from taproom to bottle shop, filling your trunk with the fruits of the amazing southeastern brewers’ labors. I think we need to continue to seek out the new and different, but we also need to pay homage to the breweries who started the movement and got big because they consistently brew damned good beers… if for no other reason than we may find we have forgotten how much we enjoy their beers or how well-crafted they are. And by all means support the core beers of your favorite locals… don’t just cherry pick their special releases.

No one is saying that you should not like what you like, and if chasin’ whalez, brah is it, by all means, you do you. Just remember that for every bourbon barrel-aged vanilla chocolate coconut imperial stout that is sold only every fourth year on the night of a full moon onsite via lottery by a critically acclaimed nanobrewery who produces only 3 barrels per year, there are thousands of amazing beers on the shelves you used to love before you reached your current level of sophistication. That local or regional brewery that turned you on to craft might be struggling, and showing your love in the form of a six-pack purchase here and there would be good karma. It might remind you of why you started drinking craft in the first place. There’s room for all of it in our collective beer fridge. For now, at least.

Rich Partain is the GM of Huntsville’s Das Stahl Bierhaus, a bottle shop and taproom. He spent years as the sales manager and road warrior for Huntsville’s Straight To Ale and Yellowhammer Breweries.